Tuesday, 10 April 2012


Facebook has agreed to a deal to buy the photo-sharing-application company Instagram for $1 billion. This is the social network’s largest ever acquisition in a move that many see as an attempt to bolster the company’s value before its impeding Initial Public Offering. This is a huge price tag to pay for a company previously valued at around $500 million that has very little revenue. The factor that may have caused Facebook to pay so much for Instagram is its rapid growth. Facebook decided that the best way to prevent a possible competitor from continuously growing in market share was to buy it out completely. Facebook also has wanted to make a push to increase its revenue stream from mobile site usage, which is rapidly outpacing the website’s growth. This is a huge departure from Facebook’s normal strategy of buying out small companies and signals a change in mindset for Facebook’s top executives. How will investors judge this move by the social media giant? In what is expected to be Silicon Valley’s largest-ever IPO, investors will have to decide if Facebook is making this acquisition in order to grow or if it was just a move to eliminate potential competition.

Michael Felicetta

No comments:

Post a Comment